News

Chorus Chant: A La Carte’s Bad

5/09/2004 8:00 PM Eastern

Cable rates and indecent programming continue to dog the cable industry.

Cable operators addressed the second matter by offering free blocking technology to customers that need it.

Rep. Nathan Deal (R-Ga.), an a la carte proponent, last Wednesday mocked cable’s blocking proposal, arguing that it still forced consumers to pay for programming they don’t want or think is indecent and inappropriate for their children.

Deal compared cable’s blocking option to a hypothetical hamburger joint that won’t sell the beef unless it’s bundled with fries.

“That’s like saying to the guy who has to buy the combo: We furnish you a trash can free of charge that you can throw the fries in on the way out the door,” Deal said. “I don’t think that’s the kind of choice that most people feel is appropriate.”

WHAT FANS LIKE

A la carte fans think their approach has at least two positive attributes. By picking channels on an individual basis, consumers will decide how much they will pay for cable and decide which programming is unsuitable for their children.

“We hoped the V-chip would work. It didn’t,” Senate Commerce Committee chairman John McCain (R-Ariz.) said last week.

Deal and McCain are crafting separate a la carte bills with the active support of consumer groups, longtime broadcast-indecency foes and right-leaning organizations aghast that cable channels with naked flesh and naughty words are parked beside Disney Channel and Cartoon Network.

A la carte has created a new alliance. Consumer groups that have always complained about high cable rates have suddenly discovered the indecency issue, and conservative groups that have always complained about indecency have suddenly discovered the issue of cable rates.

“I don’t have to buy Hustler to get Good Housekeeping. So why should I have to do that in cable?” said Jan LaRue, chief counsel for Concerned Women for America, which released a May 5 poll showing 80% opposed paying for programming they didn’t want to watch.

NCTA: POPPYCOCK

The National Cable & Telecommunications Association dismissed the poll as biased because people weren’t asked whether they would be happy to know that they would likely have to pay more to receive fewer channels.

“Our guess is that if consumers were asked whether they’d prefer to have cable or satellite service for free, they’d also answer with a resounding yes,” NCTA spokesman Brian Dietz said.

At last week’s National Show here, cable leaders were rigidly on message that a la carte would inflict serious harm on consumers, operators and programmers.

They all said in comments, speeches, and written statements that a la carte would cause rates to soar because cable networks that lost advertising revenue would have to recover it through higher license fees, which inevitably get passed along to subscribers.

Programmers, especially niche networks, would struggle in an a la carte world because tiers reaching millions of households offer the best chance of finding an audience and developing an ad revenue stream.

NOT VIABLE?

Cable leaders questioned whether a la carte was even a viable business model and wondered how consumers would react when the $40 they pay today for 60 channels only bought 8 to 10 channels in a la carte world.

“The market is a much better mechanism for sorting these things out than any group of people holed up in the seat of government in Washington or wherever,” Time Warner Inc. chairman and CEO Richard Parsons said.

Comcast Corp. CEO Brian Roberts compared the expanded-basic tier to a shopping mall that enables stores to survive because they are bundled together. The NCTA, he said, did a “super job” by rallying the industry behind the free blocking offer.

“We have a better solution than changing the business practice of 30 years of an industry,” Roberts said.

Roberts also recalled that price regulation of cable under the 1992 Cable Act “stifled the innovation” and hurt cable’s ability to expand program diversity within expanded basic. A la carte mandates, he added, would be particularly inappropriate today, because cable has national competition.

“We are not an unregulated local monopoly. The reality is everybody in this room can go out and have DirecTV and Dish Network … [and] a fourth choice in a quarter of the markets,” Roberts said.

Both Deal and McCain think a la carte legislation has a chance this year.

Deal’s bill would force programmers to allow cable and satellite to retail channels a la carte, though the distributors would be under no legal obligation to do so. McCain, by contrast, is for straight retail a la carte of all basic channels, though cable and satellite providers could continue to offer tiers.

Deal wants to attach his bill to another measure extending the Satellite Home Viewer Improvement Act, which is pending before the full House Energy and Commerce Committee. However, House rules might block Deal from imposing cable a la carte on a bill concerning the direct broadcast satellite industry.

“I am bound by the issue of germaneness on the Satellite Home Viewer Improvement Act,” Deal said. “I think I’m going to have to limit it to satellite.”

EchoStar Communications Corp. and the American Cable Association support Deal’s amendment.

McCain isn’t facing germaneness problems in the Senate for his a la carte proposal, which can be attached to almost any bill.

“I think there is a chance in the amending process because clearly the pressure is building to allow the choice,” McCain said. “The fascinating thing about the cable-TV companies, they are saying, 'It’s either or.’ We’re just saying, 'Present two choices.’ ”

September